Four months before a tax amnesty scheme comes to an end, scores of Kenyans of Indian origin have moved back about $127.70 million to Kenya from banks in Gujarat. In a bid to boost its cash reserves, the Kenyan government had extended a tax amnesty in June to people who had hoarded their money abroad. The government scheme offered them immunity against prosecution.
Data from the Kenya National Bureau of Statistics (KNBS) show that the foreign currency deposits held in banks rose by $600 million in June. The trend can be attributed to Kenyans taking advantage of the tax amnesty announced by the government on foreign-held assets as well as higher diaspora remittances, the EastAfrican newspaper reported.
Between April and June of this year, more than $59 million was withdrawn from banks in Gujarat, the Times of India reported, citing the State Level Bankers Committee in Gujarat, the highest body of bankers in the state representing 46 banks, including the Bank of India and Bank of Baroda.
Bank officials and tax experts believe that $127.7 million in non-resident Gujarati deposits have been withdrawn from Kutch banks since December last year, with the majority of the withdrawals done by the Bhuj and Mandvi talukas native to Gujaratis who have settled on the continent, the report added.
“Under the Kenyan tax amnesty scheme, citizens are supposed to repatriate their foreign earned assets and also to declare their foreign earned income before the expiry of the amnesty in order to avoid penalties,” Sanjay Sinha, Lead District Manager, Kutch, SLBC Gujarat, told the publication.
The KNBS data showed that the forex deposits reached $5.74 billion in June, up from $5.14 billion the previous month, the East African newspaper said. Most of these funds reached tier three banks that have seen higher inflows ahead of the deadline that expires at the end of this year, it added.
The tax amnesty scheme expires in December and individuals who fail to repatriate the money until then will have to pay 10 percent penalty. “The voluntarily declared funds should be repatriated to Kenya within the amnesty period. Funds not repatriated within the amnesty period may be repatriated within a further five-year period but with a 10 percent penalty on such remittances,” the Kenya Revenue Authority said in a notice.
Two years ago, Kenya amended its tax law to provide amnesty on income declared for the year 2016 by a person who earns taxable income outside Kenya. However, this received a lukewarm response and had to be extended twice to woo more Kenyans to repatriate their cash back to the country.
“We realized that even with the extension, the uptake of the amnesty has been low mostly because there were concerns that when the money is returned, there would be question the source as required by Financial Reporting Centre,” the EastAfrican quoted National Treasury Cabinet Secretary Henry Rotich as saying.
The rules were changed for the current amnesty, which was issued during the 2018-19 budget presentation. Kenyans are now allowed to repatriate their money tax-free and no questions would be asked about its source, the report added.